Pandora® Internet radio is one of the more interesting concepts to hit the web. Built on a powerful music recommendation engine known as the Music Genome Project®, it enables a listener to hear streaming music selections chosen on the basis of the musical styles of their favorite bands, performers or songwriters.

If you enjoy the jazz piano style of Marian McPartland, for example, Pandora will stream performances in a similar vein – such as the songs of Beegie Adair and Joe Bushkin. And you can create numerous personalized channels (also called “custom radio stations”) focusing on different styles of music to suit whatever mood or occasion you wish.

… Except with Pandora, you do “kinda-sorta” know what you’re going to get. I’ve been a Pandora listener for over a year now, and I’ve been introduced to musical artists I didn’t know before and probably wouldn’t have stumbled upon otherwise … and I’m the richer for it.

Pandora may be an Internet star today, but it sure didn’t start out that way. The brainchild of Tim Westergren, Pandora labored under difficult circumstances for the better part of a decade. The Music Genome Project took years to build and calibrate, during which time Pandora’s yeomen developers were obliged to work for large stretches at a time without pay.

Also, as with many Internet sites, figuring out an effective business model was challenging — and a barrier to obtaining funding.

Then in 2007, just as Pandora seemed on the verge of breaking out, an action by the Copyright Royalty Board raised Internet radio royalty fees to prohibitive heights, resulting in a court action that was finally settled in July 2009 in a compromise ruling.

Through it all, Pandora managed to survive, and now is close to having 60 million registered users. The Internet site is attracting sufficient advertising dollars to bring in profitable quarters. Revenues topped $50 million in 2009 (~60% goes to paying music royalties), and revenues are on track to double this year.

Always innovating, Pandora is now expanding into TV sets and automobiles as well, although the majority of activity currently comes from computers and a significant minority from mobile phones.

Long-term, Pandora believes the biggest potential rests in automotive. Consider this: Once listeners realize they can simply skip over a song on Pandora they don’t like, it should change forever the way people interact with radio.

[…] The company reports that it pays approximately 70% of total revenues back to music rights-holders. It’s not profitable yet … but how many years was Pandora bleeding red ink? The better part of a decade, certainly. […]